Charitable Contributions

Just as an individual is allowed tax deductions for charitable donations, a business is afforded the same opportunity. A business’s charitable donations are a little different from an individual’s, though. A business can make three types of charitable contribution: services, cash, or property.

If a company contributes its services to a charity, it is not entitled to a deduction for those services, but can deduct non-reimbursed expenses incurred in rendering them. If a company contributes cash, it may deduct a contribution that is up to 50% of its adjusted gross income. If the company contributes appreciated property (a property that has experienced an increase in value), it is entitled to deduct the value of that property for that tax year.

Of course, determining the value of property donated as a charitable contribution requires an appraisal of that property. Defensible documentation of the property’s value is required by the IRS.

Present Value LLC is a full-service appraisal firm that can help you determine property value for tax purposes.

By: Present Value

Tags: charitable contributions, taxes
Posted in Tax issues | 1 Comment »

Ad Valorem Tax

An ad valorem tax is a tax based on the value of real estate or personal property. Ad valorem is Latin for “according to value.”

One example of an ad valorem tax is property tax, which a real estate owner pays on the value of the property being taxed. There are three kinds of property: land, improvements to land, and personal. The taxing authority requires an appraisal of the value of the property, and the tax is assessed according to that value. Types of property tax vary from state to state.

Another example of an ad valorem tax is land value taxation (LVT), which is assessed on the value of land. This tax does not take into account buildings, improvements, or personal property. Thus, LVT is different from other property taxes on real estate (the combination of land, buildings, and improvements to land). All real estate property tax has an element of land value tax because land value is part of overall property value.

Ad valorem taxes (primarily real property tax and sales tax) are a major source of revenue for state and local governments, especially in states without a personal income tax.

By: Present Value

Tags: ad valorem tax, LVT
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The Pension Protection Act of 2006

The Pension Protection Act of 2006, signed into law in August 2006, was designed to help Americans protect and grow their retirement savings. The act includes discussion about tax incentives and regulations for pension and charitable giving reform.

Those who engage in charitable giving are eligible for tax deductions, and there are rare cases in which charitable giving moves a donor down a tax bracket, which would require that they pay fewer taxes. Part of the Pension Protection Act of 2006 was designed to strictly regulate this process. Since the act was signed into law, the IRS requires charitable donors to arrange for an appraisal of the possession to be donated and submit a substantiated and certified appraisal report when filing their tax statements. It also specifies that the appraiser the donor engages must be Uniform Standards of Professional Appraisal Practice (USPAP) certified.   

The Pension Protection Act asks appraisers and charitable donors to share responsibility for an accurate appraisal. The charitable donor is responsible for supplying the necessary paperwork to the IRS proving that his or her responsibility was fulfilled, and the appraiser can expect punishment from the IRS if he or she artificially inflates the value of the charitable donation.

 If you are planning on making a non-cash charitable donation of an item worth more than $5,000, make sure that you first have it appraised by a reputable and certified appraiser.

 By: Present Value

Tags: The Pension Protection act of 2006
Posted in Machinery & Equipment Appraisal, Tax issues | 1 Comment »

Tax Abatement

Tax abatement is a reduction of taxes or an exemption from taxes granted by a local government on a piece of property for a specified length of time.

Those who own property in Economic Revitalization Areas (ERAs) are eligible for tax abatements. To qualify, owners must make improvements to their property or purchase and put into use new manufacturing equipment. Those who lease facilities can benefit from tax abatement on real property as well if the property owner applies for tax abatement and all other requirements are met. Also, tenants can benefit from abatements on manufacturing equipment and/or research and development equipment. For the purposes of tax abatement qualification, a certified appraiser can determine the value of an improved property or equipment.

Because of tax abatement, property taxes can’t be lower than the prior year’s taxes. The phase-in period is determined by the local government. New manufacturing equipment can have abatement terms for a period of one to a maximum of 10 years. New real estate investment options can also have abatement terms from one to a maximum of 10 years.

Tax abatement can apply to buildings, defined as any new structure, addition, or other improvement that increases the property’s assessed value. Tax abatement can also apply to any new or used equipment that is involved in the production, fabrication, manufacture, assembly, or finishing of other tangible personal property, including equipment used to dispose of solid waste or hazardous waste for conversion into energy or other useful products. Used equipment is eligible for abatement unless it has been previously taxed.

By: Present Value

Tags: tax abatement
Posted in Tax issues | 5 Comments »

C Corporation to S Corporation Conversion

One of the big questions you have to answer for yourself when considering incorporating your business is whether to classify yourself as a C corporation or an S corporation, also called a subchapter S corporation. This decision will have a big impact on the way your business is taxed. The main difference between the two is that a C corporation pays state and federal taxes on its earned income and shareholders are taxed on earned dividends. This is called double-taxation. An S corporation pays no income taxes. Instead, the owners of the business, the shareholders, pay taxes on the company’s profit. This is a pass-through model.

C corporations may find that they can realize significant tax savings by converting to S corporation status. To convert from a C corporation to an S corporation, you’ll have to file a Form 2553 with the IRS. This is something that should be discussed with your tax advisor because their experience may help you avoid the common pitfalls of C corporation to S corporation conversion. One of the things they’ll consider if this question arises is the value of your business, including goodwill, which we discussed here in our post about the Small Business Association. It is very important that a thorough business appraisal be conducted prior to restructuring in order to fix the value of the corporation’s stock, assets, and goodwill.

By: Present Value

Tags: business appraisal, C Corp to S Corp Conversion, c corporation to s corporation conversion, Goodwill, Tax issues
Posted in C Corp to S Corp Conversion, Goodwill, Tax issues, business appraisals | 1 Comment »

Navigating Crucial Business Decisions in a Down Economy

In a down market, business owners tend to do one of three things: they close their doors, sit tight and ride out the storm, or capitalize on the opportunity. “One of the most important and most complex decisions that business owners have to make right now is whether to grow or retract in this economy,” said Chris Spinelli, co-founder of the appraisal company Present Value.

Some businesses may succumb to the downturn and will need to sell off assets in preparation for bankruptcy declaration. Others, still stinging from tax time, may simply be searching for ways to save on taxes next year. Still others may be considering an equipment purchase or an acquisition of a struggling business. Present Value can assist business owners in any of these three situations by conducting certified business or equipment appraisals.

“When planning their reactions to the current economy, it’s important for our clients to know the worth of their assets,” said Chris Kinzie, Present Value co-founder. The company recognizes that many of the regulations surrounding equipment appraisals and business valuations can be confusing, and Present Value seeks to provide its clients with the necessary information to help them make informed, prudent business decisions. “We want to help our clients not just make the next choice, but the best choice,” added Kinzie.

Check out our press release on Yahoo Finance: http://finance.yahoo.com/news/Present-Value-LLC-Helps-prnews-15133330.html?.v=1

By: Present Value

Tags: appraisal management company, business appraisals, Business Valuation, Equipment Appraisals, Machinery & Equipment Appraisal Costs
Posted in Business Valuation, Machinery & Equipment, Tax issues, business appraisals | 1 Comment »

What’s It Worth?

Everything has a value. Today, more than ever, it is important to know what it’s all worth. As a business owner, it is important to know the true market value of your machinery and equipment for a whole host of reasons, such as insurance and business valuation. It is relatively simple to determine the value of a farm tractor or an out-of-the-box piece of equipment. An appraiser will look at various factors to determine value, including its original price, wear and tear, depreciation, and current market value. It is a straightforward process because there are millions of pieces of equipment against which they can be compared to determine fair market value. However, it is much more difficult to determine the value of custom-made equipment such as dies, molds, or custom machinery.

An appraiser must take into account that such equipment may be one of a kind, which makes it more difficult to value because there are no other pieces against which to compare it. A whole host of considerations must be taken, including the cost of its production, the value of its usage, the cost of its replacement, depreciation, salvage value, and scrap value. The appraisal of custom equipment requires the specialized skills of a professional who has the expertise and certification to examine all of these factors and more to determine its true fair market value.

Whether you need to know the fair market value or other standards of value such as liquidation value, salvage value, or replacement cost, it makes good financial sense to obtain a credible certified equipment appraisal report that will hold up under scrutiny with financial institutions, government agencies, buyers, sellers, shareholders, or partners. Make sure you know what it’s worth.

Tags: Custom Appraisal, equipment appraisal, Machinary Appraisal
Posted in Custom Appraisal, Machinery & Equipment, Real Estate Appraisal, Tax issues, Uncategorized, Videos, business appraisals | 1 Comment »

1031 Exchanges

Tax time is here, and even while you’re puzzling over that pile of papers on your desk, you may already be planning for next year. If selling an asset and purchasing another is in your plans for 2009, you may want to consider a 1031 exchange.

A 1031 exchange is an IRS-recognized method of deferring capital gain taxes. A capital gain is any profit that comes from the sale of a property, and this income is taxable. However, there is a way around this particular type of tax. If you sell one asset and acquire another within a specific time frame, you’ve performed a 1031 exchange. The logistics of an exchange are the same as in a sale, except that the asset sold and the asset purchased must be of equal value, or like-kind, and must be used for a business in order for the transaction to qualify for the tax deferral. The idea behind this particular section of the tax code is that when money gained from the sale of an asset is used to purchase another like-kind asset, there is no economic gain.

The tax code is fairly clear on its definition of like-kind when it comes to depreciable property, like a piece of machinery, but its definition of like-kind in real estate transactions offers less guidance. This is where working with an experienced appraiser becomes important. Because the IRS keeps an eye on these types of transactions, you want to make sure that you’re working with an appraiser who understands the IRS like-kind definitions.     

So after you clear that pile of papers from your desk, keep this possibility in mind – it may make next April 15 a bit easier.By: Present Value LLC 

Tags: 1031 exchange, equipment appraisal, machinery appraisal, Real Estate Appraisal, Tax issues
Posted in Machinery & Equipment, Real Estate Appraisal, Tax issues, business appraisals | 1 Comment »